Mortgage Terms

L

Late Charge
The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.

Lease
A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.

Leasehold Estate
A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.

Legal Description
A property description, recognized by law that is sufficient to locate and identify the property without oral testimony.

Lender
An institution that makes loans to borrowers on real estate.

Liabilities
A person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Liability Insurance
Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.

Lien
A legal claim against a property that must be paid when the property is sold.

Lifetime Cap
A provision of an ARM that limits the total increase in interest rates over the life of the loan.

Lifetime Payment Cap
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.

Line of Credit
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.

Liquid Asset
A cash asset or an asset that is easily converted into cash.

Loan
A sum of borrowed money (principal) that is generally repaid with interest.

Loan Commitment
Formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.

Loan Origination
The process by which a mortgage lender brings into existence a mortgage secured by real property.

Loan Servicing
The collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Loan -To-Value
(LTV). The loan-to-value ratio (LTV) is the original loan amount divided by the lower of the sales price or the appraised value.

Lock
The period, expressed in days, during which a lender will guarantee a rate.

Lock-in
A written agreement in which the lender guarantees a specified interest rate if a mortgage goes to closing within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.